The State of Data Centers in NoVA
Executive Director of Economic Development, Loudoun County, Virginia, Buddy Rizer, talks about the current State of Data centers in NoVA.
Raymond Hawkins: All right, welcome. This is Raymond Hawkins, your host of Not Your Father’s Data Center. We are joined today by, I think his official title is King of Loudoun County. There’s probably a more technical term for that, king, sultan… Somebody told me he was executive director of Loudoun County Department of Economic Development, but I think the king of the county sounds got a little more ring to it for me, Buddy.
Buddy Rizer: Well, I think King is still better than Godfather of Data Center Alley, which is-
Raymond Hawkins: That’s right. It is just catchier. King of the county.
Buddy Rizer: King of the county.
Raymond Hawkins: A little bit of a… I think we should get you shirts. I think that’d be awesome. Get Buddy Rizer merch as the kids would say these days.
Buddy Rizer: Merch.
Raymond Hawkins: Buddy.
Buddy Rizer: Got it.
Raymond Hawkins: Yeah, yeah. King of the county merch. Buddy, you’ve been with us before on the podcast. We really, really appreciate it. For folks that don’t have that episode loaded, will you give us a couple minutes on, you always find that the folks understanding who we’re talking to is helpful. Love for you to be a little personal about it. Where where’d you grow up? Where’s home? How’d you end up in Loudoun County and how did you end up with the internet revolving around what you do? I don’t think people realize how big what you do is for all the things they do on the internet, so connect us to there, but let’s go back to the beginning.
Buddy Rizer: Yeah, no, I am very excited by what has been a very interesting and long and winding career. I’d started in radio when I was 15 years old and spent most of my life in major market radio. And when I guess about 16, 17 years ago, I decided it was time to… I joke, grow up and get a real job. And I had learned a lot about economic development through serving on economic development commissions and those kinds of things and decided I wanted to give it a try to be in economic development and applied to a lot of places, got a couple of offers and decided that Loudoun would be a good opportunity. Gosh, that’s 16 years ago now and it’s hard to believe, but when I came, my first thing was, “Well, what is our product? What do we sell?” And we had AOL and we had WorldCom and PSINet and just a lot of these big tech companies and kind of identified data centers as an opportunity. And we had these three buildings that were built Pretech Bubble.
And then, we kind of went through this process of what do we do with those three buildings? And I was lucky enough to be able to work with your CEO, Chris Crosby, when he was at digital and decided then and there that we would at least give a shot to trying to figure out what to do with those buildings. And we ended up coming to a deal and that was the first digital realty campus. And we’ve been off to the races since then. To be honest with you. We’ve got about 30 million square feet of data center.
Raymond Hawkins: So, early on three buildings, what are we going to do with these and what are we selling here? And I mean certainly there was some internet fiber infrastructure under the ground that made it make sense, but you really capitalized on that. So, let’s get back to that part of the story because it is unbelievable how things have changed in 16, 17 years.
Buddy Rizer: Yeah, no question. And we had a lot of the assets and that was really my first thing. It’s like I started going to data center conferences and trying to learn, I got an early certification and data center operations just because I wanted to understand what was important. And we had available land, we had readily available cheap power, we had more internet than anywhere in the world because MAE-East was here at the time, Equinix was here, we had WorldCom, we have AOL, so we had infrastructure. My thing was how do we then layer on some services on top of the infrastructure that might be able to make something really happen here.
And I’ll be honest with you, those early days we were just trying to figure it out, what are the important things? What are the things that we need? So, we were early on in trying to figure out what zoning worked and how that could work here. We learned early on that having dedicated people who knew what data centers were and what data center industry needed would help. So, we created this fast-track team that where if you were a data center, you were pretty much getting the same people every time. So, you weren’t having to explain time and time again what was important or why you couldn’t put a loading dock here, but you needed to put it here. So, I think we’ve done a lot of those kinds of things.
We typically haven’t incentivized a lot of development in Loudoun County over the years, haven’t really needed to. But we did understand that there was some things that we needed to do to make it price competitive. So, worked with the Commonwealth of Virginia on a sales tax incentive that became one of the first and one of the best and is now critically important to our success. And 33 states have data center sales tax exemptions now.
Raymond Hawkins: I was going to say the gold standard that everybody measures against, I mean people states start with that and go, “Okay, here’s how Virginia did it.” And it’s where that concept started a 100%. And it is so vital to us as developers when we think about where we’re going, “Hey, what’s their state package look like?” I mean, that’s the first question we ask. So, great stuff.
Buddy Rizer: And for us, we wanted to provide as much predictability and certainty, price wise, process wise and if we could do that, then that gave me a strategic advantage to go out and market the county. Now, would I have ever thought that we were going to be the largest in the world? It wasn’t until 2016 that we became number one, and we’ve been kind of on a rocket ship since then as we’re about 30 million square feet, about two gigawatts of critical load. And we think that we’ve got the headway for another 20 million square feet and about another two gigawatts. We could be a four gigawatt market before the end of the decade.
Raymond Hawkins: Holy cow. So, Buddy, for guys listening to this podcast, they’ll understand the square footage, they’ll understand the gigawatts, but get the technology because it’s mostly data center industry people. But I’d love it if you’d share with us what it’s meant to the county and nothing that needs to be get anybody in trouble, but what has it meant to the county as far as how the rest of the county has developed? What has it meant to the county from a tax base? What has it meant to the county from a services perspective? To me, I think at the end of the day in the chair you sit in, yes, there’s a myriad of businesses you could promote and bring to the county. This one worked out the way it did. What has it meant to Loudoun County to have the hub of the internet in your backyard?
Buddy Rizer: Raymond, I think that’s a great question. And I think to properly answer that, you have to understand where we were in 2006, 2007, 2008, we were going through a global recession, the great recession. Things were really tough here in Loudoun County, we at that time were about 19% commercial tax and 81% residential. Of course, what drove that great recession home values-
Raymond Hawkins: All right, home values crashing, loss of confidence in the credit market due to homes. Yeah.
Buddy Rizer: So, if you are making most of your money and we were, if you’re making most of your money, your tax revenue on homes and the values of homes go down, you’re in trouble. And so, I came in with a charge that we’ve got to grow the commercial tax base that is job one. That’s why I’m here. And so, I started looking at what does a fast-growing community really need? Well, at that point, we didn’t really want a whole bunch more people. We were already growing by 15,000 people a month. We were growing really, really fast. So, we needed to catch up, we needed to come up with some ways to do that. And data centers were the perfect thing for us. And because it’s a high investment number, we get paid on property tax, real property and personal property tax, big investment there and a low drain on services.
And so, it allowed us to catch up with schools. It allows us to catch up with roads and those services. In 2008, our tax rate had got up to a $1.285 per 100 really high, data centers over the years and we’ll get over a half a billion dollars in local tax revenue this year. Data centers have been abled us to lower our tax rate to 89 cents last year. I challenge you to point to any other community in the country that has been able to lower the tax rate by 40 cents and talk about what does that mean and what does that mean to our citizens? What it means is less pressure on them as homeowners to pay for the government, but it also means that we were able to build all kinds of schools and put a billion dollars in the road infrastructure and bring the Washington DC Metro to Loudoun County and provide great jobs and provide services and really have one of the most resilient and healthy economies anywhere in the country.
And really it was that decision in 2006, 2007 and 2008 to really focus on data centers. That has changed our community dramatically.
Raymond Hawkins: So, Buddy, I want to connect some dots here because I think when you look and you see incredible success stories like the data center business in Loudoun County, for me, like most people, I like a single cause, a single effect. It’s easy for me to understand this happened and this is what resulted, and I can get it, but as I hear you tell the story, what an incredible confluence of events. The county under pressure because of the housing and credit crisis that killed home values in ’08, ’09. The county under pressure because you’ve got huge influx of population, the county under pressure because that population’s tax base is getting pushed and pushed and pushed. I think you said 1.285. You’re pushing that homeowner pretty hard on supporting all the infrastructure in the county. And because of the timing of that, the internet is really starting to change lives.
The applications are coming, the smartphones are coming, what we do and how much bandwidth we eat. And that is starting to become a real thing about that time too. And to take all of that and lay it on together and now turn around and look back and see how incredibly well it fit together and the fiber in MAE-East and you know, had a few people data center or service providers already in the market, but what an incredible layer of other factors to make for or at least to prime the pump for what you were able to do over the next 15 years is really pretty incredible. You think about the law of unintended consequences, who would’ve thought a global credit crunch caused by lack of confidence in the housing market and would fuel the need for data centers? I mean, it’s sort of a circuitous route to go, “Hey, we’ve got an opportunity here.” Buddy, you mentioned number, you said a half a billion in revenue. Is that the 2023 number or over a half a billion in tax revenue? Is that the run rate now?
Buddy Rizer: I think it was 560 million last year. I mean think depending on market conditions and dealing with some of the market constraints that I know we’ll talk about, we see that as a billion dollar asset before the end of the decade.
Raymond Hawkins: Wow, just incredible. Can you give me, just for reference’s sake, in terms of the county’s budget, what percentage is that half a billion dollars?
Buddy Rizer: Well, we estimate that the data centers are more than a third of our overall revenue.
Raymond Hawkins: Wow. Holy cow.
Buddy Rizer: Yeah.
Raymond Hawkins: That’s unbelievable. Well, what you’ve done, and I know folks know you and I joked at the beginning about the king of the county. I mean not only lots of great overlap, but how you embraced it, the things that you did, the having data center specific people, understanding the business, meeting with people and understanding what they need and doing is and has really been fantastic. And now let’s go to the other end. You’re a little bit of a victim of your own success. So, you mentioned a little bit the constraint. It’s not a secret to anyone, listen to this podcast, that there’s some challenges in the county about is there any more dirt left at the size that my industry needs? And the bigger question is how long are we waiting for power infrastructure? And you don’t responsible of creating dirt, as they say, “They’re not making any more dirt,” and you’re not responsible for the power grid, but I know them both intimately.
So, can you talk a little bit about what’s going on there, Buddy, and how the county is leaning in, telling the story, helping the plan, just how does the county think about, are there still more pockets to grow? You said two gigawatts going to four, so you must think there are, love to hear that a little bit of the land story and a little bit of the power story from the county’s perspective.
Buddy Rizer: Sure. Well, let’s start with land. I think it was never our intention to be overly dependent on any single industry, just like we didn’t want to be overly dependent on residential 15, 16 years ago. So, you want to take a balanced approach. And so, it is important that we identify what is available for continued data center growth, but also preserving that land for other uses, other jobs, other opportunities, other growth. So, we’ve taken kind of a strategic look now we do not have a lot of big parcels left today. We have a couple of things that we’ve kicked around. There’s a huge parcel south of the airport we call those Cloud South that we think is a future opportunity. There’s some infill opportunities. Companies have been able to strike some deals on some land that we’re going to transform and make into data centers, but we wanted to take a more strategic look at that, and I think we’ve done that.
I think organic growth gets us another 10 million square feet as if like a data center, if we didn’t sell one more acre of land to a data center, I think we get another 10 million square feet easy. But then we have these new projects that are coming online that can really layer on in the right place with the right infrastructure. When you look at the county and you look at the way and where data centers typically are, it’s up and down what we call Data Center Alley, that’s Waxpool, Loudoun County Parkway, North and South, then Route 50 and where then north and south from there. There’s some pockets in Sterling, some pockets out near Leesburg there, there’s a lot of places. But if you look at it and then you look at the infrastructure, you’ll see that we’ve kind of laid it out. Most of the data centers are where if you were planted it from scratch, you’d want them to be.
So, we are looking at that and we’re trying to make sure that we’re taking just a real thoughtful approach to it. So yeah, I think there is still more opportunity, but eventually that opportunity will… There’s a land rush and people are still trying to find property and they’re paying millions of dollars an acre a deal got done just a couple of weeks ago at 3 million an acre. There’s been one deal that was closer to 4 million an acre. That’s a little higher than typical. But I think that we still see that opportunity. But then we look at the densification, some of the one story buildings that are approaching 15, 20 years old. Is there an opportunity then for growing those and going multistory, so we think there’s a lot of opportunity there. And I do think that we are interested in continuing to grow and we want to continue to grow what we think is the most important industry driving the industries around it. So, we think there’s still opportunity there.
Raymond Hawkins: So, there’s land to grow in and that was a great, I’m a shepherd of the county’s land description and love here in how well you know it, so there’s places to grow. You mentioned in that conversation, “Hey, can we increase some density, if we’ve got a 15 or 20 year old data center building, can we refresh multi-story? Not only that, can we just get some more power in that building because now we can run it at a higher density.” That leads us to the second part of the conversation, and again, I know this is not your responsibility, but how’s the county thinking about power, not just generation, but power distribution to this very power hungry industry.
Buddy Rizer: And I think power is probably the key right now. There’s no question that over the last decade and a half that the dominion has been really the gold standard in the industry in working with the industry, working with us. We’ve always been a great partnership. We’ve always kind of looked at power as a given that if you give us and dominion enough time, we’ll get the power there. That was right up until about July of last year when I think a confluence of events and turnovers and changes kind of got us to a point where all of a sudden there was question that the ability to deliver power in particular to what we call Data Center Alley proper, and that’s that eastern corridor in the county, there’s still power available in a lot of the other areas. Still plenty of power available where your campus is out by the toll road, still plenty of power available down on Route 50 and up and down that north, south 500 kV line.
But it’s in that specific area where there’s some challenges, and I don’t want to downplay it was a shock to us. It was something we didn’t see coming. It was something the industry didn’t see coming. Companies were investing billions of dollars here based on we’ll serve letters that told them they would be able to get the power. So, I’m not going to downplay it at all, but when you’re looking at a longevity of an industry, an industry that is still fairly nascent in its development, we’re talking about a shortage of power that is relatively short-term. We believe that we’ll be able to meet all demands by the early parts of 2026. So, while three years isn’t ideal, and while it does make a huge difference, we are taking very proactive steps with dominion working hand in hand to deliver the future power lines, right now we’re bolstering some of the existing infrastructure that will deliver some more power.
We’re creating new substations on east and west of a line that we’re creating that will help deliver that power. And they have filed a line for a high voltage line called Wishing Star to Mars in the southern part of the county that will get us to where we need to be today, where those power constraints will be lifted. We’re fast tracking that we’re working through land acquisition and all those things that you need to do. And we expect that power will be delivered by early ’26. So, you’re looking at less than three years at this point.
Raymond Hawkins: So, there’s a pause, but this is not doomsday, not that the party’s over. It said, “Hey, we’ve got a bump in the road and we’re going to get there.”
Buddy Rizer: Right. And listen, do we want to have our data centers with buildings that they can’t fit out? Absolutely not. We get about 15% of our tax revenue from the buildings and about 85% from the equipment in the buildings. So, buildings without equipment inside, that’s not very good for us either. So, we acknowledge it’s a significant issue, but it’s a temporary issue. And I don’t think you make long-term investment decisions based on temporary conditions. That’s kind of what-
Raymond Hawkins: I don’t want to make this episode The Love Buddy Rizer episode, but let me just say, as a representative of the industry and the developers and landowners in your county, hearing how you guys recognize the problem, hearing how you guys are helping, hearing how clear you understand the problem and how you guys are fast tracking and helping and planning with our partners at Dominion, this could be so much worse and so grateful for y’all’s level of understanding and your partnership. And I understand it helps you guys that we can energize and put servers in there. I get that it helps us both, but you guys are such good professionals and understand the problems and are doing everything to help. And for us as an industry, it’s super appreciated.
Buddy Rizer: Well, I will say that there’s nothing wrong with The Love Buddy Rizer episode, first of all.
Raymond Hawkins: So, those of you who named my episodes, they’re just a suggestion from Buddy and I from two old radio guys. Well, just an idea, kicking around.
Buddy Rizer: But I will also say-
Raymond Hawkins: Valentine’s coming, Buddy. So, I mean, hey [inaudible 00:24:01].
Buddy Rizer: I will also say that I’ve taken more than my share of slings and arrows over these land issues and power issues. So, it’s nice to get some positive reinforcement. So, thank you, Raymond. I appreciate that. But no, I’m mean-
Raymond Hawkins: Imagine you’ve had one or two tough phone calls about power, Buddy. I can’t imagine.
Buddy Rizer: Oh, yeah, yeah. Thank God that Chris wasn’t one of them.
Raymond Hawkins: All right. Oh, good.
Buddy Rizer: Yeah. But no. And then, we’re also, we’re planning with Dominion, we have monthly meetings at the highest level talking about after that we’re delivering power in ’26, but what does it look like in ’28 and how do we make sure that this isn’t an issue that we run into again? So, plans are in place and we’re going through that process and hopefully if we do this again in a year, we’ll have another plan in place for ’28 and beyond. Because I mean, you just want to make sure that you are being proactive, that you’re being aggressive, that you’re really working collaboratively. Somebody has to be in the middle of all this.
Somebody has to be able to go to the industry and say, “Here’s where we are.” Go to Dominion and say, “Here’s what we need.” Go with the county government and the state government and say, “Well, here are the priorities, here’s the time.” And then really figure out how do we get there. And that’s really, that’s what we’ve been trying to do because at the end of the day, I’m not hooking up circuits and I’m not buying the properties, I’m not doing the servers, I’m not building the towers, but we’re trying to facilitate a speedy remedy to this as best we can.
Raymond Hawkins: So, Buddy, you mentioned in that summary that there’s state level stuff, county level stuff. Can you talk a little bit about, we already referenced earlier that the state incentive package for data centers first out of the gate and the gold standard and now emulated 30 plus states across the union. Can you talk about what’s coming legislatively there in the Commonwealth? What are you guys working on and what’s getting together for what the future looks like?
Buddy Rizer: And if I may, I’ll start on the local scene.
Raymond Hawkins: Yeah.
Buddy Rizer: We’re going through a zoning ordinance rewrite. And I think one of the things that we have done that is unique across the data center industry is, so we’ve had the data center industry at the table as we have planned the zoning ordinance rewrite. We’ve talked about design standards and sustainability goals that are the industry’s goals and how do we enable that? How do we make sure that we’re doing this? I mean, when you go through a zoning ordinance process, it can be very blocky and by the book. And if you don’t bring real word world market conditions into the discussion, you know can have a lot of unintended consequences. So, salute to the industry and Chris Curtis has been part of this process from your company trying to determine what is it that’s important. And we go back to where we started 15 years ago.
Where do you want to site? Where does the industry want to site the orientation of the building? Where does the office piece fit into the critical load piece? Where do you need your loading base to go and what are those things that are important to you that can achieve mutual goals, our goals and yours? So, salute to the industry for being at the table and helping us through that process. I think we’re going to end up in a very good place. And I talk with Josh Levy if not every day, almost every day from the Data Center Coalition. We have the industry representatives come in and we do working sessions every couple of weeks in my office as we try to get to this. So, all that I think is really important on the state level. The Commonwealth has really recognized the opportunity for data centers across the Commonwealth.
And so, there’s steps being taken now to try to make sure that we’re able to meet that from a Commonwealth perspective as well. We’d like to grow data centers across the commonwealth. I would say if it can’t be here in northern Virginia, and that’s Loudoun, Prince William and fuck here in Stafford to some extent. Where else? And they’ve built something really good in Henrico and near Richmond. And are there other opportunities? The Virginia Beach landing. So, I think the state is incentivized to continue to look for those opportunities. My thing right now, I think the most important thing that can be done in the current session and in other sessions is either to extend the sunset on the tax incentive, which right now is scheduled to end in 2035. We’re just eliminate the sunset.
We need to give the industry what we’ve tried to give from the very beginning and that is certainty, certainty in process, certainty financial, certainty in your tax liability. So, I think that that’s something that we’re working very hard on as a state. I think our legislators are incentivized and committed to trying to create that great environment across the Commonwealth.
Raymond Hawkins: So, you raise a point that I thought I’d ask a question about, what is the Buddy Rizer sweepstakes look like? I mean, how many times are the county other counties calling trying to recruit you away? I mean, are you under long-term contract? When do you become a free agent? Are there offers, “Hey, we’ll give you four legislators and a mayor to be named later in exchange for Buddy today,” and what’s it like? I mean, there’s got to be counties clamoring for you to come help them build this business.
Buddy Rizer: Well, I mean, I think it’s get a mixed bag, you get the good, but then you get all the baggage that comes with that. So-
Raymond Hawkins: Your agents fielding offers from all over county, all over the state.
Buddy Rizer: Yeah, yeah.
Raymond Hawkins: And it’s a package-
Buddy Rizer: I mean, I think that if you talk to anybody in the Commonwealth, they’ll tell you that I have tried to not only be conscious of this industry in Loudoun, but across the Commonwealth, I’m at a point where it would be hard to uproot me. And I think everyone, I love what I’m doing. I’m committed to this. And in a weird kind of way, I feel a responsibility now to get through the challenges we’re dealing with now before I’d even think about anything else. But not only-
Raymond Hawkins: You’re breaking economic development hearts all over the state, Buddy.
Buddy Rizer: I don’t know about that. But I think that in addition to the Commonwealth where the governor’s current and past have asked me to help across the state, Senator Warner asked me to help other jurisdiction across the state. I think all that’s great. But I also think from an industry standpoint, you’d be amazed at how many calls I get from outside of Detroit or Idaho or really all over the country and picking my brain about how we built what we’ve built. And I don’t think it’s rocket science. I think it’s just putting… I always say let’s make it easy for our businesses to spend money. If we can make it easy for them to spend money, then good things come. But I’ve also been working a lot internationally.
Raymond Hawkins: Have you been talking to my ex-wife making it easy to spend money? I didn’t…
Buddy Rizer: Right.
Raymond Hawkins: She has a seminar on it too, just so you know.
Buddy Rizer: Right.
Raymond Hawkins: Yeah.
Buddy Rizer: I’ve been working in India to help them with their data center. I was honored to have lunch with the president of Ghana in December, and he spent the entire lunch asking me about data centers. And so, he has invited me to come speak to the legislators in Ghana in June to just talk about our experience. So, it’s not a zero-sum game anymore. It’s not like if we don’t win or if somebody else wins, we lose. It’s really important I think, because the future of not only the economy which has become a digital first economy that can’t operate without the infrastructure and the infrastructure that enables that is the data centers. So, it’s important, it becomes an equity issue. If you talk to the president of Ghana as I did, he’ll tell you that he wants to have that the internet be ubiquitous there like it is here.
He wants to make sure that people can use medical health over the internet, banking and security and emergency services and opportunity. This is the infrastructure that enables that. So, I do think it’s part of my mission at this point in my life to expand that as much as I can in my own little way. Well beyond the boundaries of Loudoun County.
Raymond Hawkins: Well, Buddy, as for me, a fitting way to close The Love Buddy Rizer episode, the things you just rattled off, for you to go talk in Africa, you’re going to book a plane ticket and you’re probably going to do it via the internet and you’re going to probably have an Uber drive you to the airport and someone’s going to have Chewy deliver dog food to their house and someone’s going to order Uber Eats and someone’s going to… Or watch Netflix and all of that happens over the internet. And there’s lots of people, lots of smart, hardworking, good people that enable that digital infrastructure. And for me and for our industry, you’re one of those key people and thank you for help, what an incredible job you’ve done shepherding the county, shepherding clearly the most important market in North America and the world and you’re a great friend to us, great friend of the industry and a great steward for helping the planet get more digital and hearing you doing that in Africa’s pretty cool man.
Thank you so much for chatting with me again. I know our folks that listen to us like listening to you and hearing what’s going on and it’s been great to have you, Buddy. Thank you.
Buddy Rizer: It is been an honor. I mean, I love what you guys are doing. I think that you created an important leg in building this digital infrastructure. All hail to the King, King Crosby and Chris Curtis, my good friend and you and really your whole team. It’s an honor to work with you and it’s been, in all seriousness, the joking around The Love Buddy Rizer episode. I just want to try to make as much of an impact as I can and if I can do that at the tail end of my career, I take that as a win. So, I’m excited for what we’ve been able to accomplish and excited for the opportunity to spread that message.
Raymond Hawkins: Awesome. Buddy, thank you for joining us and man, we look forward to… You already pre-book. We’ll be doing this again next year. Love hearing what you’re doing here in the county and love hearing how things are going. And if we sunset that 2035 date, that’d be awesome.
Buddy Rizer: We’re doing our part.
Raymond Hawkins: All right.